Telegram Business Model: How Telegram Makes Money

With more than 2 billion monthly active users worldwide, Facebook-owned WhatsApp is the most popular messaging app. But Telegram, launched in 2013, around four years after WhatsApp, has been slowly and steadily covering the ground. 

More than 550 million users were actively using the service as of July 2021, with users increasingly flocking to Telegram after WhatsApp announced a contentious privacy policy update, forcing users to accept the updated terms until 8th February 2021.

Due to the public backlash, WhatsApp eventually decided not to enforce the privacy update. Still, this entire episode injected life into the debate around which messaging app — WhatsApp, Telegram ot Signal — should people opt to use to safeguard their privacy and security. 

This blog will investigate why Parel Durov founded Telegram & how it makes money because the founding principles and monetization mechanism influence its functioning. Once we’ve learned all of that, we’ll also see how Telegram’s privacy stacks against WhatsApp & Signal. 

Telegram Founding Story

In 2006, Durov launched VKontakte, a Facebook clone that became Russia’s most popular social networking site. In 2014, eight years later, Durov sold his last, remaining 12% stake in the company for a reported sum between $300 and $400 million. In between the two events, Durov had an encounter with the Russian government, which forced him to give up VKontakte’s ownership and nudged him into founding Telegram.  

Parel Durov, co-founder & the public face of Telegram, is often regarded as Russia’s Zukurberg in the media. 

According to Verge, Russian authorities asked Durov to shut down VK pages operated by activists when anti-Putin protests broke out in 2011 amid allegations of election fixing. Durov declined the request, responding by sharing a dog’s picture with its tongue out on his Twitter handle. 

In an open letter published later, Durov said his decision of not complying with the government was motivated purely by business motives, not political thought. He argued that if VK was forced to restrict such groups and foreign social media companies were not, then the Russian social network would die a slow death. 

Soon after this episode, Durov lost 48% percent of his VK stake through a fishy backroom deal. United Capital Partners, an investment firm managed by purported Putin ally Ilya Sherbovich, bought Durov’s stake, who only learned about it when a reporter reached out to him for comment. 

Even after the deal, though, Durov wielded majority control over VK. He had earlier secured voting rights of the 40% percent VK stake owned by Russian internet giant Mail.ru. Combined with his personal 12% stake, he held 52% company voting rights this way.   

But United Capital Partners began to pressure Durov to focus on monetizing VK through more advertising, and Mail.ru — partially owned by Alisher Usmanov, a Russian businessman, also believed to be a close ally of President Vladimir Putin — began pushing for a larger stake. 

“The goal of this deal was to put [VKontakte] under the control of businessmen who are friendly to the Kremlin,” Nickolay Kononov, author of a bestselling book on VK, told Verge at the time. For the uninitiated, the Kremlin refers to the Russian Federation government, similar to how the “White House” refers to the United States President’s executive office. 

In April 2014, Durov finally succumbed to selling his remaining 12% VK stake after resisting government pressure to release Ukrainian protest leaders’ data. Ivan Tavrin, then chief executive of telecom provider MegaFon, also controlled by Usmanov, bought Durov’s stake.

It was during his encounter with the Russian forces that the idea of founding Telegram occurred to Durov. When he first refused to shut down activist groups in 2011, a SWAT team showed up at his door. In an interview with the New York Times, Durov said, “They had guns and they looked very serious. They seemed to want to break the door.” 

During the SWAT standoff, he called his brother, Nikolai Durov, co-founder of VK and Telegram. At that time, he realized that he did not have a safe means of communication, one that could not be possibly compromised by Russian authorities. 

However, VK’s fate had opened Durov’s eyes to the challenges of growing a digital communication platform in Russia. So, Durov left Russia after selling his VK stake, registering Telegram as an offshore entity to evade Russian interference. He has, since then, been traveling with the core Telegram team, living like a nomad. 

A year and a halt after its launch, By Dec 2014, Telegram had more than 50 million monthly active users. Telegram crossed the 100 million MAU, 200 million MAU, 300 million MAU mark in Feb 2016, March 2018 & October 2019 respectively. In Jan 2021, Durov announced that Telegram had crossed the 500 million MAU.

Because Telegram takes the privacy-oriented approach in product development and marketing, the company sees increased growth during times of governmental restrictions in times of political upheaval. Telegram also sees growth when major services like Facebook, Instagram, and WhatsApp suffer technical outages.

Telegram Business Model

The short answer to how Telegram makes money would be is through sponsored Messages — a tool that allows advertisers to promote channels and bots. Up until the sponsored messaging ads were launched in November 2021, Telegram was financed personally by pavel durov. Telegram had also raised $1 billion by selling bonds( a form of debt) to investors.

Now, let’s purse the long answer to how Telegram makes money. Telegram’s first tryst with making money came in the form of a $1.7 billion raise through an Initial Coin Offering in 2018, but the SEC halted the issue in 2019, deeming it unlawful. 

For seven years, Durov kept Telegram afloat using the money he earned from selling his VK stake. But with the kind of growth Telegram was seeing, sustaining the company purely through his own money would be impossible. In 2020, Durov shared a message on his public Telegram channel revealing his plans to monetize the service. 

Firstly, Durov clarified that he has no plans to sell Telegram. He cited WhatsApp’s example, which after being acquired by Facebook, had to compromise on its original vision. In case you didn’t know, both the WhatsApp founders left the company after disagreements with their Facebook bosses. In fact, Brian Acton, one of WhatsApp’s founders later gave $50 Million for forming the Signal Technology foundation, a non-profit organization established to support Signal, the private messaging app. 

Signal’s story aside, Durov also made it clear Telegram will not charge regular users any money, nor will it show any ads in private 1-to-1 chats or group chats, which is Telegram sponsored message ads launched in November 2021 will only be shown in large public one-to-many channels with 1000+ members.

For the uninitiated, Telegram channels are like a public broadcast list without any limits on the audience size. To give you an example, Pavel Durov himself has a public channel to which close to 10,000 people are subscribed.

To make sure Telegram sticks to its principle of protecting user privacy, sponsored message ads will be solely based on the topic of the public channels in which they are shown, and no user data will be used for any kind of individual targeting.

Durov has also stated that as the sponsored message ads mature over time, Telegram also plans to share ad revenue with creators after recovering the money spent for running Telegram.

As per what Durov has communicated earlier, one can even expect Telegram to launch premium features to add an additional revenue stream. While existing features will continue to remain free, Telegram will roll out new features for Business users and power users. And since these new features will require extra resources, premium users will be required to pay for them. 

Telegram Vs. Signal Vs. WhatsApp. 

When it comes to privacy, one of the most discussed points is end-to-end encryption, and rightly so. Put simply, end-to-end encryption ensures nobody, including the messaging service, can see the content of your messages. 

In Telegram’s case, the app does not offer end-to-end encryption by default. It has a “secret chat” option, where user communication is secured using end-to-end encryption, but this does not extend to groups. 

So technically, unless you’re communicating using the secret chat feature, Telegram can access messages stored on its servers, to which it holds the key. Considering Telegram’s founding was based on the premise of user privacy, and there are no severe claims of Telegram acting in bad faith, you could still trust Telegram with your content. But it would not be ideal because having end-to-end encryption would have made it impossible for Telegram to access user messages, even if they wanted to. 

On the other hand, WhatsApp uses the open-source end-to-end encryption protocol developed by Signal, making all conversations, including group chats, private by default. The problem with WhatsApp, however, is that metadata, the information associated with the time and location of the message, is not encrypted. So, while WhatsApp can’t read the actual content of your messages, it still knows who you’ve messaged and when.

Signal, compared to Telegram & WhatsApp, scores the highest points in the privacy game. Not only are all conversations end-to-end encrypted, but it also doesn’t collect metadata. The only thing Signal has been criticized for using phone numbers as its primary ID, but the company has said it doesn’t collect any data linked to the number. The process of alerting users when one of their phone’s contacts joins Signal, intended to drive growth, is also facilitated anonymously to maintain user security. 

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